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Currency and Inflation - General Awareness Multiple Choice Questions and Answers

31 A very rapid or out of control growth in prices in which money loses its value to the point where ever barter may be preferable is known as:
A Inflation
B Deflation
C Disinflation
D Hyper- inflation

Answer: Option [D]

A very rapid or out of control growth in prices in which money loses its value to the point where ever barter may be preferable is known as Hyper- inflation. Hyperinflation refers to a situation where the prices of goods and services rise uncontrollably over a defined period of time. In general, the term is used when the rate of inflation increases at more than 50% a month.

32 Which of the following can contain Inflation ?
A Surplus Budget
B Increase in taxation
C Reduction in public expenditure
D All the above

Answer: Option [D]

The correct answer is All the above.



33 The effect of inflation on tax revenue results in a situation known as:
A Reflation
B Stagflation
C Fiscaldrag
D None of the above

Answer: Option [C]

The correct answer is Fiscaldrag. Fiscal drag is an economic term whereby inflation or income growth moves taxpayers into higher tax brackets. This in effect increases government tax revenue without actually increasing tax rates.

34 Which of the following accounts for Cost-Push Inflation ?
A Increase in population
B Increase in non-plan expenditure
C Increase in money supply
D Increase in indirect taxation like higher VAT, excise duties etc.

Answer: Option [D]

The correct answer is increase in indirect taxation like higher VAT, excise duties etc. Cost-push inflation is an economic situation where the general price level in the economy rises for all the relevant goods owing to increase in their cost of production that results in some market change for the real output for those goods. Therefore, increase in wages and salaries results in increased cost of production that leads to inflation.

35 Whose signature is found in one-rupee currency note ?
A Finance Secretary of India
B Finance Minister of India
C President of India
D Prime Minister of India

Answer: Option [A]

Under Section 22 of the Reserve Bank of India Act, RBI has sole right to issue currency notes of various denominations except one rupee notes. The One Rupee note is issued by Ministry of Finance and it bears the signatures of Finance Secretary, while other notes bear the signature of Governor RBI.

36 Broad money in India is:
A M1
B M2
C M3
D M4

Answer: Option [C]

Broad money in India is M3. Broad money (M3) includes currency, deposits with an agreed maturity of up to two years, deposits redeemable at notice of up to three months and repurchase agreements, money market fund shares/units and debt securities up to two years.

37 Increasing prices related to:
A Generation of black money
B Adverse effect on speculation
C Promotion of inequalities
D Adverse effect on balance of payments

Answer: Option [B]

Increasing prices related to adverse effect on speculation.

38 Immediately prior to change in the measure of Food Inflation, which of the following indexes was being used for measuring it ?
A Wholesale Price Index
B Export price index
C Consumer Price Index
D Interest Rates offered by banks on deposits

Answer: Option [A]

The correct answer is Wholesale Price Index. Wholesale Price Index (WPI) represents the price of goods at a wholesale stage i.e. goods that are sold in bulk and traded between organizations instead of consumers. WPI is used as a measure of inflation in some economies. Annual rate of inflation based on all India Wholesale Price Index (WPI) number eases to 10.7% (Provisional) for the month of September, 2022 (over September, 2021) against 12.41% recorded in August 2022.

39 M1 includes:
A Demand deposit with bank
B Currency with public
C Other deposits with RBI
D All of the above

Answer: Option [D]

M1 includes All of the above.

40 Monetary policy is regulated by:
A Money leaders
B Private entrepreneurs
C Central Bank
D Microfinance organizations

Answer: Option [C]

Monetary policy is regulated by Central Bank. Monetary policy is the process by which the monetary authority of a country, generally central bank, controls the supply of money in the economy by its control over interest rates in order to maintain price stability and achieve high economic growth. In India, the central monetary authority is the Reserve Bank of India (RBI).

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